Giving to charity not only helps others in need, it can provide the giver with many benefits. You feel good that you did something to help your fellow man (or other living things) and you may reap financial rewards as well in the form of tax deductions. When we hear the word “donation,” we often think of money, but there are lots of things you can donate to charity, from clothing to cars. If you are considering donating non-cash items, here are some important considerations.
If you plan on writing off your donations, you need to come up with a value of all the goods you are planning on donating. If you plan on donating something brand new, keep tags or receipts to prove what you paid. If you are donating common household items like appliances or clothing, the Goodwill and Salvation Army provide valuation guides to assist you. If you plan on donating something that is worth more than $5,000, you must receive a written appraisal confirming this price.
Required documentation for your donation will depend on its value. If your donation does not exceed $250, a receipt from the charity is all you need to keep on file. For donations totaling $250 to $5,000 dollars, you will need a written acknowledgement of the donation, which is a bit more detailed than a receipt—the charity will likely be aware of this and be able to provide you the proper paperwork. For non-cash items that are valued between $501 and $5,000, you will also need documentation showing the acquisition date, fair market value and how much the item cost. For anything valued at more than $5,000, you need all of the aforementioned documentation plus a written appraisal.
When it comes to deductions for household items, such as clothing and furniture, you can only claim items that are considered in “good” or better condition. But you can make deductions for items in less than “good” condition if an appraisal values them at more than $500; an example might be an antique chair that is only in “fair” condition. If you receive such an appraisal, it is important to keep this paperwork on file.
Boat donations as well as the donation of planes and vehicles are a bit different than other noncash items. One of the most important differences is in the amount you can deduct. While for other items, you can deduct the fair market value, here you are limited to deducting how much the charity received from the sale of the item. So, for the purposes of your write-off, the government cares about what it sold for, not what it may be worth.
If you plan on donating enough money to charity that you qualify for itemized deductions rather than taking the standard, it may be a good idea to take photographs of all the things you gave away to charity. In the event of an audit, this could prove very helpful in verifying your donations.
This article was designed to provide an overview and is in no way an exhaustive explanation of non-cash items and your taxes. Like any area of tax law, it is complex with lots of gray areas. The IRS has gotten stricter over the years when it comes to writing off donations to prevent the gross fraud that many have resorted to in the past. If you plan on making substantial donations to charity, whether cash or non-cash items, you should really consult with a qualified accountant for guidance.
About the Author: Kelli Cooper is a freelance writer who has written about various tax and financial issues.If you are considering giving away a boat, follow the link to learn more about how to donate a boat to charity.